Merger mania hits K Street

AT&T amassed a Washington army to muscle a megamerger with T-Mobile past regulators in 2011, blanketing Capitol Hill in a massive PR campaign.

The result of the shock and awe: failure.

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So now, as the company dreams of building a new telecom and television powerhouse in a $49 billion deal to buy DirecTV, AT&T is taking a very different approach: Walk softly and carry a big stick.

The AT&T-DirecTV deal is just one of three expected giant telecom marriages that lobbyists will try to shepherd through Washington in the coming months. Comcast is already engaged in a bid to take over Time Warner, and many in the industry are watching closely to see if Sprint will make a play for T-Mobile in the coming weeks.

There’s little else drumming up business downtown in a sleepy election year, so on K Street it is merger mania.

AT&T’s new strategy was on display Monday when the company’s many Washington consultants huddled but received no direct orders or lobbying assignments on the merger from company execs.

Instead, AT&T is relying on its internal lobbyists and company leaders to make strategic calls to key Capitol Hill offices and to others at the FCC, according to sources familiar with the strategy. Contract lobbyists did help put together call sheets but they weren’t launched into a big blitz.

“AT&T had an experience that has already taught them to take a less aggressive approach,” said one telecom lobbyist, referencing the failed T-Mobile merger.

Another veteran Republican lobbyist described the strategy as a “soft sell.”

“Most of the action is going to be behind the scenes at the [Federal Communications] Commission and [the Department of Justice],” the Republican lobbyist said. “I don’t think you are going to see some of the tactics that were used with the T-Mobile merger. I think it’s going to be a little quieter, a little less aggressive.”

Top lobbyist Tim McKone of AT&T’s and DirecTV’s top lobbyist Andrew Reinsdorf have also held several calls.

But while AT&T is mostly relying internally on its early phase of getting the word out about the merger, DirecTV is enlisting its hired guns to reach out to staff on the House Energy and Commerce Committee, Senate and House Judiciary committees and the Senate Commerce Committee to make sure they heard about the merger directly from DirecTV.

AT&T spokespeople did not return a request for comment. DirecTV declined to comment.

In part, the different strategies reflect the telecom and satellite-TV provider’s Washington operations. AT&T has long had one of the most storied and powerful in-house lobbying operations that has fought telecom wars for decades. The company spent nearly $3.7 million on lobbying during the first quarter of 2014 with 23 firms on retainer. AT&T has already brought on three additional lobbying firms this year, including Cloakroom Advisors, Jefferson Business Consulting and RR&G.

It’s a stark contrast to DirecTV’s operation that lists just two lobbyists on its federal disclosures. DirecTV spent $690,000 during the first quarter of 2014 and has eight firms on retainer.

The divergent strategies also demonstrate how invested DirecTV is in trying to ensure the deal moves forward. If another company makes a bid for DirecTV, it would have to pay AT&T about $1.4 billion in penalty fees if the merger doesn’t go through. Unlike the proposed merger between AT&T and T-Mobile in which AT&T ended up paying out $3 billion in cash in addition to other provisions after regulators blocked the deal, this time AT&T can walk away without penalty.

Several lobbyists said that in addition to taking the lessons learned from its failed merger with T-Mobile, AT&T is also taking notes on how Comcast is navigating its proposed takeover of Time Warner. Comcast is following the same model it used in its successful takeover of NBC-Universal in 2011. The company has largely focused on the FCC and DOJ since that’s where the final decision will be made on the deal. Additionally, Comcast has hired strategic lobbying firepower, run ads inside the Beltway and testified on Capitol Hill. Comcast spent $3 million on lobbying during the first three months of 2014 and has more than 40 firms on retainer. Comcast put Bloom Strategic Counsel, Holland & Knight, Polaris Government Relations, Levick Strategic Communications and Stuart Chapman on retainer in 2014.

Comcast Executive Vice President David Cohen was in Washington on Monday and attended the company’s regular consultant meeting. Cohen addressed the AT&T merger, saying that Comcast would not be commenting on it and that the company is focused on its own bid to merge with Time Warner.

While K Street has struggled to keep revenues up in recent years, many industry experts see telecom as a bright spot that could help fuel the second half of the year’s lobbying numbers. While much of the activity this week is focused on mergers — the FCC is also fueling a lot of activity as it considers net neutrality and proposed spectrum auction rule.

“It’s almost every week somebody new is coming on,” said David Rehr, former National Association of Broadcasters president and CEO. “Every friend of a friend of either a member who sits on the commerce committees or the FCC is getting picked up.”

McCormick Group headhunter Ivan Adler described the injection of K Street activity as a “godsend.”

“These are bet-the-company issues, and whenever that happens they spend a lot of money on outside counsel,” Adler said.

With the Comcast deal not expected to be decided until first quarter 2015 and AT&T’s bid for DirecTV until the second quarter of 2015 — K Street action will continue for the foreseeable future. Other telecom companies, trade associations and government watchdogs are also expected to get in on the action.

“You are going to see market competitors think about how they can slow it down,” Rehr said. “They may not be overt about it. They’ll be working corridors of the FCC to delay it, put conditions on it.”